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Tue, 19 January 2021

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The chancellor has learned that the Budget is no laughing matter

The chancellor has learned that the Budget is no laughing matter
4 min read

Philip Hammond packed his Budget speech with jokes, but with a tax move that was a ‘clear breach’ of a manifesto promise, it's not so funny for the country 

This is what happens when you don’t have an effective opposition. Philip Hammond’s budget spoke to a certainty at the top of the government that it can get away with pretty much anything while Labour wallows in introspective despair.

Mr Hammond’s decision to raise national insurance on the self-employed was a clear breach of the 2015 Conservative manifesto, which guaranteed voters on at least four separate pages that the tax would not rise.

The chancellor was told by his advisers that there would be an outcry, not just over the broken promise but over the fact that the Conservatives appeared to be targeting the strivers and ordinary families they had pledged to protect.

In an era of broken trust in politics, it was hard to think of a policy more likely to generate opposition. But one could see from the body language on budget day that Mr Hammond and Theresa May were supremely confident they could brush it aside.

Mrs May chortled at Labour’s Jeremy Corbyn with a Ted Heath-style shoulder-shuddering laugh which ended up on several newspaper front pages as a metaphor for apparent government arrogance over the consequences of the Budget.

Mr Hammond was contemptuous of the official opposition. “They don’t call it the last Labour government for nothing,” he said. The chancellor quipped that Mr Corbyn was “so far down a black hole that even Stephen Hawking has disowned him”.

Amusing stuff, but not very funny for the country. The fact is that ministers should not be able to come to the despatch box and blithely rip up a manifesto commitment not to put up taxes without squirming in their seats.

In Mr Hammond’s defence, the NIC changes seek to address the unfairness in a tax system which has left a gap between the NIC rate on the self-employed and employed that costs the Treasury £5bn a year, heading up towards £6bn.

A better way to have dealt with the problem was to reform the system this autumn as part of a wider review of taxation and benefits for the self-employed being carried out for the government by Matthew Taylor, a former adviser to Tony Blair.

Mr Corbyn barely mentioned the unfolding NIC furore when he replied to the Budget, further confirmation of Labour’s impotence. The idea of the tax rise was trailed in several newspapers ahead of the budget, so he might have been prepared.

Fortunately there are other checks and balances. The media – particularly the Conservative-supporting press – gave the policy a pummelling. Although Mrs May and Mr Hammond are less concerned about media coverage that most politicians, picking a fight with the Mail, Sun and Telegraph is uncomfortable for a Tory PM.

And then there is the Conservative party itself. With a working majority of just 17, Mrs May is vulnerable to Tory rebellions and the early signs are that her MPs may not be prepared to let the NIC move pass.

I don’t remember a Budget by a Conservative chancellor causing so much immediate backbench disquiet since Norman Lamont’s decision to put VAT on fuel in 1993. Even opposition to George Osborne’s “omnishambles” Budget in 2012 took longer to crystallise.

Mistakes inevitably erode a prime minister’s authority. Mrs May will hope the budget shambles does not embolden her MPs when the EU (notification of withdrawal) bill returns to the Commons on 13 March.

At the heart of their deliberations will be the Lords amendment that says parliament should have a meaningful vote on Mrs May’s Brexit deal.

She is asking MPs to trust her judgment on the biggest peacetime negotiation the country has faced: the Budget saga will have done little to bolster parliament’s faith in the executive. 

George Parker is political editor of the Financial Times 




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